Narendra Modi will inherit an economy with high forex reserves but also high debt. How will he leverage one and correct the other? Here are the main strengths and challenges he will have:

Narendra Modi will inherit an economy with high forex reserves but also high debt. How will he leverage one and correct the other? He has the comfort of record foodgrains production, but how will he use this to tackle inflation and achieve price stabilization? He has some of India's leading public sector units like Coal India and others sitting on huge piles of cash. How will he get them to put the money to work? Will be able to push for quicker clearances on environment and land acquisition and get states to speed up clearing projects?

Of the five big challenges listed below, three (saving-investment ratio, gross domestic saving and capital formation) are directly linked to his efforts to boosts savings and curtail inflation.

Will he encourage public-private partnership to improve capital formation? Will he replicate models like the Canal Solar Power Project in Gujarat or encourage/support its variants in other parts of India? What policy support will he give to programmes that boost rural income and improve savings? He has done this in Gujarat through programmes like the one in Valod where women earn from solid waste (which is used to make fertilisers). How will he deal with these on a larger canvas?

Given below are the main strengths and challenges he will have:

STRENGTHS

>> Forex Reserves: $311.85 billion (As on May 2, 2014)High foreign exchange reserves will give more room to the RBI to buy dollars and build reserves and stabilize the rupee against the US dollar rather than allow volatile capital flows to decide the value of the rupee.

>> Cash in hand with PSUs: Rs 1,330.65 billion (As on March 2014)Better use of this cash is required rather than just asking them to pay huge dividends or invest in disinvestments of other PSUs to reduce the fiscal deficit. This cash should be invested back into the companies to pursue expansion or diversification plans.

>> Projects in the Pipeline: Rs 10,780 Billion.Even as the UPA government claimed fast track project clearances through the Cabinet Committee on Investment (CCI), as many as 301 central sector projects worth over Rs150 Crore have been delayed and anticipated cost of these projects is Rs 10,780 Billion, according to the ministry of statistics and programme implementation.

>> Reduced Current Account Deficit: $36.8 Billion (2% of GDP) The current account deficit reduced from $88 Billion in 2012/13 to $36.8 billion in 2013/14 which will reduce India's dependence on volatile foreign capital inflows such as portfolio investments to fund current account deficit.

>> Foodgrain Production: 263 Million tonnes India witnessed record foodgrain production in 2013/14 after a dismal performance in 2012/13 surpassing all time high production of 259 Million tonnes in 2011/12

CHALLENGES:

>> Saving-Investment Gap (%): -4.80High inflation lead to fall in savings in India and has widened the saving-investment gap, increasing the economy's dependence on external capital.

>> Gross Domestic Saving (% of GDP, 2004-05): 30.5For almost at a decade low, domestic savings need to pick up